Environmental Policy Analysis: A General Equilibrium Approach (review)

Reviews 277 index and glossary, and is without Chinese characters, it is aimed at a more general audience. One may hope that it will be read by non-Eastern art historians as well as specialists in Chinese history, literature, and art. Wu's clear exposition and wide-ranging theories deserve to be appreciated. Susan Bush John King Fairbank Center for East Asian Research, Harvard University Susan Bush is a specialist in Chinesepainting theory and early Chinesepainting. mm Jian Xie. Environmental PolicyAnalysis: A General Equilibrium Approach. Aldershot (Hampshire, England) and Brookfield (Vermont): Avebury, 1996. xi, 152 pp. Hardcover $61.95, 1SBN 1-85972-421-3. This new book by Jian Xie represents an effort to provide an adequate quantitative model for environmental policy analysis. This integrated economic and environmental model is based on the computable general equilibrium (CGE) approach . For two reasons, such a model is ofgreat value for Chinese environmental policy. First, since the 1970s the Chinese government has been implementing a series of environmental policies and programs in order to curb environmental deterioration in China. But, due to lack of an adequate framework for policy analysis , the economic impacts and effectiveness of these pollution control policies are largely unknown. Second, as a result of China's economic reform, "market mechanisms are becoming a dominant force in determining economic activities in China, which makes the economy suitable for the CGE approach" (p. 61). According to Xie, the CGE model could be described as "a model that numerically specifies an economy where prices and quantities for goods and factors adjust to equate supply and demand based on Walrasian general equilibrium theory" (p. 7). This model was first used to assess economic policies in i960 and then applied to environmental policy analyses in the late 1980s. Through a literature review in the fields of CGE modeling tiieory, Xie illuminates the basic concepts ofthe model and discusses both the advantages and limitations of this approach . Xie's major contribution is his development of the model by integrating y nwersity manv environmental policyvariables, pollution control activities, and pollutionproduction interactions in the conventional CGE model. In this book, Xie also creates an extended social accounting matrix (ESAM) framework, in which "pollution -related information, such as that concerned with pollution abatement sec0 ) Hawai'i Press 278 China Review International: Vol. 5, No. 1, Spring 1998 tors, sectoral payments for pollution cleanup, pollution emission taxes, pollution control subsidies, and environmental investments are accounted for separately" (p. 53). The ESAM provides an integrated, consistent equilibrium database, making the CGE model easy to implement. Based on the data for the year 1990, Xie used the CGE to simulate a series of policy alternatives for China. Xie identifies three types ofpollution: wastewater, smog dust, and solid waste in seven production sectors: agriculture, mining, light industry, the energy industry, heavy industry, construction, and service. His model contains 289 endogenous variables and 63 exogenous or policy control variables. The simulation results produce different evaluations of government policies. For instance, the author points out that the wastewater discharge fee in China is too low to give polluters an incentive to reduce pollution emissions; increasing the tax by 25 percent has negative effects on production and employment and fails to reduce pollution emissions, but if the tax spirals by 50 percent, wastewater treatment will increase from 37 percent to 73 percent. Another case involves the government purchase of pollution cleaning services; for example, a municipal government pays wastewater treatment plants to clean municipal sewage. Xie's simulation shows that spending ¥200 million on wastewater treatment slightly affects industrial development and pollution emissions, while doubling the spending to ¥400 million will cause a significant decrease in pollution generation and production. The author does not come to a concrete policy proposal, but his quantitative analysis provides decision makers with reliable references. For further study, Xie suggests using the environmental CGE model "for other types of environmental policy simulations, including enhancing law enforcement in pollution emission taxation," and "for analyzing the environmental impacts of an economic policy" (pp. 118-120). In this book, the CGE model was calibrated to the ESAM for its parameter specification, and conditional sensitivity systematic analyses (CSSA) were also conducted to test the...